Non-Financial Liabilities and Effective Corporate Restructuring

40 Pages Posted: 17 Nov 2023 Last revised: 29 Apr 2024

See all articles by Bo Becker

Bo Becker

Stockholm School of Economics; Centre for Economic Policy Research (CEPR); ECGI

Jens Josephson

Stockholm University; Research Institute of Industrial Economics (IFN)

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Date Written: October 19, 2023


Many countries’ insolvency systems focus on restructuring financial liabilities, and ignore operational liabilities such as leases and long-term supplier contracts. We model insolvency procedures with and without operational restructuring options. Such options avoid excessive liquidation of firms with significant non-financial obligations. Ex-ante, this option should increase debt capacity, especially in industries with inputs supplied under executory contract. We test this hypothesis around the introduction of a new law in Israel which facilitated the rejection of contracts, and by comparing capital structures for industries with high lease obligations between the U.S. and other countries. Empirical results confirm that operating restructuring is a key aspect of insolvency.

Keywords: Bankruptcy, insolvency, restructuring

JEL Classification: G33, G30, G32

Suggested Citation

Becker, Bo and Josephson, Jens, Non-Financial Liabilities and Effective Corporate Restructuring (October 19, 2023). Swedish House of Finance Research Paper No. 24-02, Available at SSRN: or

Bo Becker (Contact Author)

Stockholm School of Economics ( email )

Drottninggatan 98
Dept. of Finance
111 60 Stockholm, 11160

Centre for Economic Policy Research (CEPR) ( email )

United Kingdom

ECGI ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

Jens Josephson

Stockholm University ( email )


Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15

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